Have we learned anything from the Financial Crisis of 2007?

Blog Summary

This blog provides a retrospective analysis of the 2007 financial crisis, drawing lessons on risk management, regulatory oversight, and the ethical dimensions of financial decision-making. It examines the causes and consequences of the crisis, focusing on the lack of transparency and the excessive risk-taking that pervaded the financial system. The narrative is a cautionary tale about the dangers of unchecked market practices and the critical need for comprehensive regulatory frameworks to prevent future crises. The blog calls for a sustained commitment to ethical finance and responsible leadership, stressing the importance of learning from past mistakes to forge a more stable and equitable financial system.

Blog Content

I would say nothing at all…. In fact, instead of changing their behavior to prevent another crisis, the Powers-that-be seem to be doubling down on the strategies that Caused the Financial Crisis in the First Place

Liberals blame deregulation and reckless Wall Street greed for the economic crisis. Conservatives blame bad government policy.

What are they doing? Well here again…. they are:

1. Pushing banks to make home loans to people with weaker credit (sound familiar?)
2. Deregulating and even promoting insane levels of derivatives (ring a bell?)
3. Following policies which lead to rampant inequality (that didn’t work out so well last time)
4. Letting white collar criminals know that they have free rein to do whatever they want, and they won’t be prosecuted (once again)
5. Letting the giant banks get bigger and bigger (the government helped them get big in the first place)
6. Bailing out the banks with hundreds of billions of dollars a year (which creates dangerous “moral hazard” – just like before the 2007 crisis – and once again destroys sovereign nations). Indeed, crony capitalism has gotten worse than ever (even though heroes have been fighting it for 100 years)
7. Enacting policies which suck money out of the U.S. economy … and ship it abroad (as they’ve been doing for 50-plus years now)
8. Enacting policies which discourage people from even trying to find work
9. Giving the Federal Reserve more power than ever (while a neutral government agency says that the Fed is riddled with corruption, and economists say the Fed caused many of our problems in the first place, and has too much power for the good of the economy)
10. Blowing insanely large speculative bubbles (when they burst in 2007, that caused the last crisis)

As to the big banks and financial institutions, looks like nothing has changed for them too as they are still engaged in the same risky behavior which got us into the 2007 crisis in the first place by:

1. Trading even more risky derivatives than at the height of the financial crisis
2. Taking insanely risky bets with the money that we deposit into our bank accounts. When some of their risky bets blow up, they will either look to the government – once again – for a bailout, or to our bank deposits
3. Getting back into “synthetic” financial instruments – which are even more disconnected from real assets than regular derivatives
4. Doing no-document mortgage loans

What could possibly go wrong?… Go figure